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The UK Stock Market Almanac 2016: Seasonality analysis and studies of market anomalies to give you an edge in the year ahead by Stephen Eckett

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The low-high price portfolio

Do investors like low share prices?

“Investors like low share prices” is the reason often given for companies having share splits or bonus issues. But surely rational investors understand that price is independent of value?

Apparently not.

The previous edition of the Almanac compared the historic performance of low-priced shares against high-priced ones. This page updates the study to include the last year’s data.

To recap, an academic paper1 in 2008 found that in the US equity market share returns are inversely proportional to share price (i.e. the lower the share price, the higher the future return). In addition, the paper found that a portfolio that was long of stocks under $5 and short of stocks over $20 ...

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